2018 (8) TMI 84 - AT - Central Excise

Supply of Yarn to Handloom Societies - N/N. 5/98-CE and 5/99-CE - whether the yarn so supplied by the appellant was actually used by the societies or not? - Held that - As per Notification, such yarn was required to be supplied by the assessee on the orders of the National Handloom Corporation subject to production of certificate and the fact that the payment for the same stands made by cheque drawn by such Cooperative Society or Corporation, as the case may be, on its own bank account - Admittedly, both the conditions stand satisfied by the appellant, inasmuch as certificate stands produced and the consideration stands received by way of cheque. There is no further obligation cast upon the assessee to find out the truth, as to whether the yarn supplied by them to various societies, under the direction of the Apex body i.e. NHDC stands actually used by such societies on handloom. An identical issue was considered by the Tribunal in the case of M/s West Dinajpur Spinning Mills Ltd. Vs Commissioner of Central Excise, Kolkata 2006 (7) TMI 390 - CESTAT, KOLKATA wherein it was observed that there being no further condition as regards the disposal of purchased yarn by the Apex body, revenue s anxiety to reach the purchaser of the Apex body and the ultimate use of the yarn is beyond the scope of the notification. The yarn having been purchased by Apex body NHDC, it was their duty to see the fair distribution of the same to the handloom sector. No end use condition can be self introduced in the notification. In the absence of such requirement built in the notification inasmuch the certificate for intended use were issued, and further use of the same being in the hands of the Apex body, who are held responsible for distribution, the fact of actual use of the yarn will not effect the appellant s claim to the benefit of the notification. Such an extraneous condition cannot be imposed by the adjudicating authority on its own. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Classification under Notification No.5/98-CE and 5/99-CE for exemption from duty.
2. Non-compliance with conditions of the notification regarding the use of yarn by handloom societies.
3. Dispute over the actual utilization of yarn by the societies supplied by the appellant.

Issue 1: Classification under Notification No.5/98-CE and 5/99-CE for exemption from duty:
The appellant, a U.P. State Government undertaking, engaged in manufacturing cotton and synthetic yarn, claimed exemption under Notification No.5/98-CE and 5/99-CE. These notifications exempted goods from duty if purchased by specific handloom societies and payment made by cheque from the society's own bank account. The appellant supplied cotton yarn to National Handloom Development Corporation (NHDC) based on orders placed by NHDC, fulfilling the conditions of the notifications.

Issue 2: Non-compliance with conditions of the notification regarding the use of yarn by handloom societies:
The revenue alleged that the appellant did not produce required certificates from NHDC at the time of clearance of goods, leading to a demand notice for duty payment. The Commissioner confirmed the demand, but the Tribunal observed that late production of certificates cannot deny notification benefits. The Tribunal also noted that the notifications did not impose a duty on the appellant to ensure the actual use of yarn by societies, as long as conditions like payment by cheque were met.

Issue 3: Dispute over the actual utilization of yarn by the societies supplied by the appellant:
The revenue claimed that some societies did not exist or did not utilize the yarn on handlooms. However, the Tribunal emphasized that the appellant fulfilled the conditions of the notifications by producing certificates and receiving payment via cheque. The Tribunal cited a similar case where it was held that the revenue's concern about the ultimate use of yarn by the societies was beyond the notification's scope. The Tribunal clarified that the notification required the yarn to be "intended to be used" and not necessarily "actually used," placing the responsibility on NHDC for fair distribution to the handloom sector.

In conclusion, the Tribunal found no merit in the revenue's stand, setting aside the impugned order and allowing the appeal with relief to the appellant.